Osborne Blames Germany for BAE/EADS Merger Talks Collapse

U.K. Chancellor of the Exchequer George Osborne blamed Germany for the collapse of the planned merger between European Aeronautic, Defence & Space Co. and BAE Systems Plc (BA/), saying Berlin effectively vetoed the deal.

“I would have liked to have found more time to discuss the possibility of a merger,” Osborne told reporters in Tokyo. “We just thought it was worth discussing and we have been a bit disappointed, primarily by Germany’s attitude, which in effect vetoed this deal.”

The comments are the most outspoken by any government minister involved in the talks to create the world’s largest aerospace and defense company by sales. France and Britain were unable to overcome German concerns about being marginalized in the combined company, whose operations would have been run out of Toulouse, France, and London, shutting out Munich, people familiar with the matter said this week.

Osborne said Britain wanted guarantees that its strategic defense interests would be assured, jobs maintained and pledges about other government stakes in the companies.

“I would have liked to see if we could have progressed on those talks even if that meant the deal couldn’t go ahead, not that we were absolutely committed to the deal or anything like it,” Osborne said.

German Denial

Two German officials this week, asking not to be named, pushed back at assertions that Berlin torpedoed the deal. The U.K. rejected France’s demand to keep open an option to increase its stake above 9 percent, they said. Germany was open to the option, provided it maintained parity with France, they said.

Germany is the European Union’s most populous country and its largest economy. On military matters, it lags behind nuclear-armed Britain and France in both conventional hardware and force projection.

According to the Stockholm International Peace Research Institute, Germany spent $43.5 billion, or 1.4 percent of its economy, on its military in 2011. The U.K. and France each spent $58 billion. That amounted to 2.3 percent of the French economy and 2.6 percent of Britain’s. France and Britain are also working together to develop the next generation of aircraft carriers and drones.

To contact the reporter on this story: Gonzalo Vina in Tokyo at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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